Reporting Requirements and Tax Increases Under the Affordable Care Act

Lost in the storm after the Supreme Court’s recent decision on the Affordable Care Act (ACA) is the fact that the Act includes several important provisions that either remain in effect for 2012 or go into effect in 2013 and 2014.  These provisions are outlined below:

• Ongoing disclosure and reporting requirements, including w-2 reporting of the value of individual insurance coverage for 2012
• Medical Loss Ratio (MLR) rebates – some employers who sponsor insured group health plans will begin receiving rebate checks from their carriers in the coming weeks
• Beginning in 2013, an additional 0.9% Medicare payroll tax on high income earners. High income earners are defined as individuals, filing separately, with earned income over $200,000 and joint filers with earned income over $250,000. The additional tax only applies to the excess earned income over the limits.
• Beginning in 2013, a 3.8% Medicare tax applies to unearned income of high income earners (individuals, filing separately, with earned income over $200,000 and joint filers with earned income over $250,000). Unearned income includes, interest income, dividends, and rents, etc.
• Beginning in 2013, there is a general increase in the medical expense deduction floor from 7.5% to 10%.
• Beginning in 2013, health FSA contributions are capped at $2,500. There is also a movement underway to modify the cafeteria plan “Use it or Lose it Rules.”
• Beginning in 2014, employers with more than 50 “full-time equivalents” must provide employer sponsored health insurance coverage. Those that do not comply will face a tax/penalty.

Individuals should pay close attention to the continued evolving health care and tax dynamic on Capitol Hill. Bi-partisan gridlock, the upcoming Presidential elections, and limited guidance will make for significant planning challenges.

For further information, please contact you Aronson tax professional or Mark Flanagan, Director Employee Benefit Plan Services Group at 301.231.6257.